Attrition - A perennial problem for leaders
One recent research report suggested that attrition in the organised sector in India is around 25 per cent. Another report pegged attrition in India at 14 per cent, higher than the global average. We may agree or disagree with the exact percentage but attrition is a perennial problem for leaders. It is an imperative for leaders to understand attrition dynamics. The right solution lies in asking the right questions. Here is the list of 5 questions that may help in arriving at the right answer.
- What is the desired attrition and what is the undesired attrition? What are the acceptable levels for each attrition category? Desired attrition may include cases of misfit or poor performance employees whom you can let go etc. Undesired attrition usually includes employees with good performance or critical skill employees etc.
- What are the top reasons for attrition at each organisational level? Typical reasons include compensation, career progression, personal, bad managers etc. Reasons may vary according to seniority level and performance category of employees.
- What are the high attrition groups? These may be from particular department, tenure, gender, performance or combination of these variables. Predictive analytics tools provide this information based on historical data. The quantitative information can be further enriched with qualitative inputs from managers.
- How is the overall industry average? This will let you know the severity of the problem in the context of the market environment. For e.g., it is quite possible that your organisation may be facing the worst attrition, whereas industry peers may be having the lowest attrition in recent years.
- What is the employee value proposition for each of the high risk attrition groups? For senior employees, money may not be the motivation factor; instead career progressions or challenging roles may be the motivation factor. The employee reward and recognition approach has to be long term. Suddenly, increasing salary may not stop attrition.
Answering these five questions will provide improvement opportunities in recruitment, onboarding, employee development and reward strategy. Working on these five questions will incur management bandwidth, technology investments and effort at organisational level. So, is it worth?
For HR managers, it is important to articulate the benefit of retention management programmes to stakeholders. A systematic retention management can easily reduce the attrition by 2-3 per cent. Assuming an employee’s average annual salary is Rs 6 lakh, the typical cost of turnover may turn out to be 150 per cent of the annual salary i.e. Rs 9 lakh by including lost business, new hiring, training etc. Considering, a mid-sized organisation of 10,000 people with annual attrition of 14 per cent, the annual cost of attrition would be Rs 126 crore. So, reducing the attrition by 3 per cent would provide cost savings of Rs 27 crore i.e. approximately by 20 per cent per year. Larger organisations will reap more benefits out of holistic retention programmes and investments simply due to economies of scale. Good luck with your attrition problem!